The Trade-off Between Static and Dynamic Efficiency in Electricity Markets - A Cross Country Study

Gugler, Klaus and Rammerstorfer, Margarethe and Schmitt, Stephan (2011) The Trade-off Between Static and Dynamic Efficiency in Electricity Markets - A Cross Country Study. Working Papers / Research Institute for Regulatory Economics, 2011,1. Forschungsinstitut für Regulierungsökonomie, WU Vienna University of Economics and Business, Vienna.


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This paper is the first to explicitly test for the presence of a trade-off between static and dynamic efficiency in a regulated industry, the electricity industry. We show for 16 European countries over the period 1998-2007 that higher electricity end-user prices in a country subsequently lead to higher investments in the capital stock, i.e. in generation, distribution and transmission assets. Moreover, there is a trade-off between vertical economies and competition. Ownership unbundling and forced access to the incumbent transmission grid increase competition but come at the cost of lost vertical economies. Generally, we find that regulation that affect only the market like the establishment of a wholesale market or free choice of suppliers increase investment activity via spurring competition. Regulation, however, that adversely affects the incumbent directly, like ownership unbundling, decreases aggregate investment spending. (author's abstract)

Item Type: Paper
Keywords: Static and dynamic efficiency / vertical economies / ownership unbundling / regulation / electricity / investments / EU / Elektrizitätswirtschaft / Regulierung / Effizienz
Classification Codes: RVK QR 600 ; JEL L43, L52, L94
Divisions: Forschungsinstitute > Regulierungsökonomie
Depositing User: Dissertation Administrator
Date Deposited: 04 May 2011 08:34
Last Modified: 22 Oct 2019 00:41


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